Brighter days seen for beaten-down art market

* Experts expect arts market recovery after 2-year slump

* Fund manager sees 2-year 40 percent rise in prices

* Top-end works to show biggest price increase

By Christopher Michaud

NEW YORK, April 16 (BestGrowthStock) – The art market plummeted
with the onset of the global financial crisis but experts, fund
managers, collectors and auctioneers are rallying on signs the
once-hot investment is on the verge of solid recovery.

Less than two years after an unusually long-lived art boom
came to an end with lower prices and a decreased supply,
bidders have returned to salesrooms, prices are mostly ticking
up and records are being set once again.

Independent fund manager Castlestone Management, which
specializes in alternative assets for global clients, has said
it anticipates a 40 percent rise in art prices over the next
two years.

Citing a 70 percent rise in equities prices since late
2008, Castlestone noted that “equities is considered to be a
key indicator when analyzing trends in the art markets.”

It compared the market to gold, which has appreciated 50
percent since November 2008 and which, like art, “is an
unleveraged, irreplaceable real asset which investors turn to”
during unsteady economic times.

Strong results at February’s impressionist, modern and
contemporary sales in London, where Swiss sculptor Alberto
Giacometti’s “Walking Man, I” set the record for any work sold
at auction with a $104.3 million pricetag, seem to bear out the

More recently, the Hong Kong sales set records and exceeded
estimates, driven in part by flush Asian buyers.

In the art world, solid results boost confidence,
encouraging owners of top-quality works to re-enter the market.
The availability of rare or fresh-to-the-market pieces stokes
bidding, which drives up prices, and a cycle is born.

Conversely, when sellers hold back, mid-range, often
second-rate works tend to flood the market, drawing scant
interest and tepid bidding — if any. The result was the
alarming drop-off in 2008 and 2009.

But as far back as December, Wedbush Securities upgraded
Sotheby’s (BID.N: ), whose shares had been taking a beating, to
outperform from neutral, citing a rebound in demand for
collectible art. Sotheby’s exceeded analysts’ expectations with
a 31 percent increase in fourth-quarter revenue.

Optimism seems well-founded with prestigious,
world-renowned and hugely valuable collections hitting the
block in New York in May.

“You’re going to see some great prices in New York,” said
Philip Hoffman, founder and chief executive officer of The Fine
Art Group Fund, an art investment house.

“The rare pieces are going to go through the roof and make
prices that you wouldn’t expect to see in the economic climate
we’re in,” he told Reuters in a telephone interview.


But not everyone is quite so bullish.

In its first-quarter report for 2010, the Mei Moses Art
Index, which tracks the value of marketable artworks, found a
nearly 5 percent decrease in the return of its index.

Michael Moses, co-founder of both Beautiful Asset Advisors
LLC and the index, noted this was driven by a sharp drop in a
single category — pre-1950 American collecting. All other
categories had positive performance in the first quarter, led
by post-war and Old Masters, the report said.

Moses also saw signs of the start of recovery, noting that
“the second half of 2009 saw a repairing of world wealth,” and
adding “there is more of a world market for art these days than

Hoffman agreed, saying Chinese collectors “are going to
make a significant impact on the contemporary and impressionist

He also said he expected that “as oil prices get stronger
it will free up lots of cash,” boosting the Middle Eastern
market in coming years. The Russian market was more
unpredictable, he said, but added that collectors have done
their homework and become more confident since first entering
the market relatively uninformed several years ago.

Marc Porter, president of Christie’s Americas, also looked
to Asian collectors for increased presence in the salesroom.

“We expect very heavy representation at both of the evening
sales (impressionist/modern and contemporary) from these
regions,” he said, referring to China, Russia and the Middle

Christie’s landed the season’s two big commissions, the
Michael Crichton and Brody collections, which Porter expects
will mirror last year’s success of the Yves St. Laurent sale in
Paris. “It’s become a very, very active market again,” he

According to Hoffman, the works at the very top of the
price list are poised to achieve the strongest results, as much
as 50 percent or more than their pre-sale estimates.

Works at the lower end of the market will probably hold
their ground, he said, while those in the middle-range or by
second-rate artists could actually tick down by about 20

Growth Stocks

(Editing by Michelle Nichols and Mohammad Zargham)

Brighter days seen for beaten-down art market